Is India's cheap food programme making the poor spend less on food?

The implementation of National Food Security Act has halved the monthly food grain expenses of 75 per cent of India's rural population

It was billed as Sonia Gandhi’s pet legislation. As it turned out, the onus was on the Modi government to execute it. The National Food Security Act (NFSA) was passed in 2013, a few months before the Congress-led UPA-2 government was voted out of power. The legislation that provided 75 per cent of India’s rural population and half its urban population with rice, wheat and coarse cereals at heavily subsidised rates of Rs 3, Rs 2 and Re 1, respectively, took a long time to fructify even after the legislation was enacted. It wasn’t until the latter half of 2016 that all states in India were ready to implement the Act. Before NFSA, only 30 per cent of India’s poorest received subsidised food grains.

Official statistics show that the poorest of Indians now have to spend half of what they did before NFSA on buying cereals. In 2018-19, as many as 597 million beneficiaries received these food grains at the heavily subsidised price. Under the Act, every person of a ‘priority household’ (PHH) is entitled to receive five kilograms of these food grains every month. PHH members comprise 75 per cent of the beneficiaries. In 2018-19, there were 530 million PHH beneficiaries who received 37 billion kilograms of food grains under the scheme – almost five kilograms per beneficiary every month.  While month wise statistics of beneficiaries in 2017-18 is available only for certain months, as of March 2018, 608 million people were listed as beneficiaries. In 2017-18, 18 billion kg of cereals were distributed to millions of people. 

Food costs halve

“Heavily subsidised cereals would definitely lead to a decline in food expenditure in rural areas to a certain extent. At this moment, I will not be able to gauge the specific impact of NFSA on reduced food expenditure. Irrespective of that, there is a real problem of falling incomes, declining output and farm distress in rural India, which would have a greater impact on reduced food expenditure,” said Abhijit Sen, former member of the erstwhile Planning Commission.

Before NFSA, poor households in India had to cough up almost twice the cost for these food grains. Poor households (Below Poverty Line or BPL) had to pay Rs six for a kg of rice and Rs four for a kg of wheat. Even above poverty line (APL) households were entitled to subsidised cereals. They have now been excluded from the ambit of NFSA. The Indian government’s last published consumption expenditure survey showed that people in rural India spent Rs 643 on an average on food. In 2011-12, the monthly per capita consumption of rice in India was almost six kg. Assuming that all of this consumption consisted of subsidised rice, the average monthly expenditure on rice pre-NFSA for a villager would be Rs 36 every month. Further, assuming that the monthly consumption of rice has remained the same in 2018-19 (though cereal consumption has shown a decline over the years), this expenditure would have halved to Rs 18 per person per month. Similarly, wheat consumption in 2011-12 in rural India was four kg, entailing a monthly expenditure of Rs 16 per person every month for subsidised wheat sold at ration shops. Post NFSA, this again has been halved to Rs eight per person every month.

The biggest decline in costs has come for coarse cereals post NFSA. Coarse cereals like jowar and bajra are now sold at Re 1 per kg, down from Rs 3 per kg before the full rollout of NFSA. Coarse cereals have the least share among all cereals in the consumption basket of Indians, both in rural and urban areas. On the whole, rural Indians consumed 11 kg of cereals every month, spending an average of Rs 44 buying only from ration shops. Post NFSA, this expenditure on an average may have declined to Rs 22. While NFSA covers only cereals, several states in India provide pulses, a primary source of protein, at heavily subsidised rates. According to LANSA, a British government-funded research organisation led by the MS Swaminathan Research Foundation, states like Haryana sold chana dal at a cost of Rs 20 per kg to every poor person per month. Every poor person was entitled to buy 2.5 kg every month at these rates. Similarly in Tamil Nadu,  pulses were being sold for Rs 30 per kg with every person entitled to one kg every month. The market price of the pulses being sold by these states was almost Rs 100 per kg on an average. The 2011-12 report estimated that 10 per cent of all consumption expenditure in rural India was on cereals. In poorer states like Odisha, West Bengal and Bihar, the expenditure on cereals was more than 15 per cent of monthly consumption expenditure.

Cutting back on essentials

The findings of a junked National Statistical Office (NSO) report on consumption expenditure reveals that monthly expenditure on food fell to Rs 580 in 2017-18 from Rs 643 in 2011-12. In villages, people cut their expenditure on all food items, except milk and related products. In fact, across India, including in cities, people drastically reduced their expenses on essential cooking items such as edible oil, salt, sugar and spices. Even as the junked report shows a decline in food expenditure by 10 per cent from 2011-12 to 2017-18, the government’s subsidy bill more than doubled from Rs 72,800 crore to Rs 1.5 trillion during this period. In 2018-19, the Indian government spent Rs 1.7 trillion on food subsidies.

“There is no link between NFSA and declining food expenditure. People in rural areas are being forced to spend less on food due to economic distress. A year after demonetisation, rural folk lost at least 10 days of work every month. It impacted the poorest of the poor. The first impact of loss in employment and income is a fall in food expenditure,” said R V Ramana Murthy of Hyderabad University.

Economist Devender Sharma said, “The average income of a farming family in rural India is Rs 1,700 per month. How do you live with that money? We should look at the impact of NFSA on food expenditure this way – people in rural India are eating whatever they are only because of NFSA. Take out this cover and they wouldn’t be even able to consume whatever little they are doing at the moment.”

According to the Global Hunger Index 2019, India improved its score despite slipping in global rankings to be placed at 102 out of 117 countries. In 2005, the index had rated India’s hunger scenario as “alarming.” In 2019, India’s situation was termed as “serious.”

Provisions	Pre-NFSA	Post-NFSA
Coverage (by Central Govt)	BPL Population (29.5% in 2011-12)	813.4 million (75% rural, 50% urban)
Quantity of rations
APL	15 kg (depending on availability)	Excluded
BPL (Priority)	35 kg	5 kg per member
AAY	35 kg	35 kg
Price of food items (per kg)
BPL (Priority)	Rice: Rs 5.65; Wheat: Rs 4.15; Coarse Grains: Rs 3	Rice: Rs. 3; Wheat: Rs 2; Coarse Grains: Re 1
AAY	Rice: Rs 3; Wheat: Rs 2